I. Field of the Invention
The present invention generally relates to a system and method for achieving predictable amounts of incoming funds from an otherwise relatively unpredictable source. By utilizing this inventive system and method, a business concern can more efficiently manage its finances.
II. Description of the Prior Art
The element of "Risk" exists in a multitude of forms in the daily life of every person. A variety of instruments, financial and non-financial, have through the years been developed to assess and to indemnify and protect against these risk factors. Many of these instruments have, in the past, been developed as insurance products. Such insurance products have been specifically created, for example, to indemnify the risk associated with the unexpected loss of human life. These specific insurance instruments are known as life insurance policies.
The many different types of life insurance policies assess and charge for this indemnification utilizing, among other resources, tables of mortality statistics that are based on empirically expected numbers of deaths occurring within large pools of people. In short, by virtue of actuarially driven premium payments, life insurance allows for the indemnification of the unexpected loss of human life by the receipt of death benefits. The premiums developed allow for "spreading" of these risks over large pools of insureds.
Although insurance premiums in general, and life insurance premiums in particular, allow for this spreading of uncertainty, no system has been developed which allows for a different type of problem of uncertainty. This is the problem of not knowing when one may receive incoming funds from an unpredictable source. This lack of knowledge translates into large costs for example, costs associated with interest rates because funds must often be borrowed to account for cash and investment shortfalls, costs associated with deferring certain investments and purchases that are badly needed by a corporation (or individual), and other attendant costs associated with the lack of needed and necessary funds.
Institutions obtain through purchases, assignment or other ownership vehicles, ownership of life insurance coverage on the lives of people with whom they have an insurable interest. If these institutions, as policy holders of the life insurance policies, own too few policies, they are uncertain about when these policies will pay death benefits.
If the number of lives that are covered by those who purchased life insurance policies are too small to fall within numbers that could yield predictability about the timing of incoming death benefits, this creates an uncertainty as to the receipt of funds to the institution. If the institution's receipt of funds is uncertain then the aforementioned, concomitant financial difficulties arise. The financial probity of the institution can be more adequately assured if the mechanism of the present invention can be applied. This will result in a greater degree of statistical probability of incoming funds for those institutions using the invention herein described.
There is therefore a great need in the art for making predictable, an otherwise unpredictable date of receiving funds. Accordingly, there is now provided with this invention a system and method for assuring otherwise unpredictable gains and for effectively overcoming the aforementioned difficulties and longstanding problems inherent in managing unpredictable inflows of funds. These problems have been solved in a simple, convenient, and highly effective way by which to assure a predictable inflow of funds. More particularly, the system and method of the present invention allows the owners of risk spreading insurance to formulate predictable patterns of the inflow of indemnification funds so as to enable those owners to realistically assess the financial impact of the risk spreading process. Additional objects of the present invention will become apparent from the following description.